The Uncredited Authors of India’s Growth Story
Photo: Karan Madhok
90% of India’s workforce remains informal and unaccounted for. Until more of our small businesses and employment contracts are formalised, this vast majority will not have access to the rights and protections that should be afforded to all citizens.
When December turned to January, 2020 to 2021, I hoped—like many others—that the worst was behind us. The numbers of those infected by COVID-19 appeared to be decreasing and many of us inched back to pre-pandemic life. Despite these signs of optimism, however, we must not ignore warnings from economists that the financial impact of this pandemic is going to be felt for some time to come. This impact may not be apparent at face value as markets soar—often, we mistakenly conflate the success of stocks with the welfare of our country.
Soaring markets in a pandemic, as the majority of our nation suffers, are a reflection of vast and growing inequality. We have witnessed our migrant workers and essential workers suffer devastating consequences of a haphazard COVID response. Over the coming year, it is likely that we will continue to see our most vulnerable suffer even more due to our failure to take appropriate action.
The numbers are shocking. The ILO estimates that 400 million informal workers are teetering on the edge of the very low poverty line and are likely to be pushed below it. The formal, academic language—while correct—fails to communicate the true depth of the tragedy that the numbers represent.
For starters, to assist the majority of India’s workforce that is living with increasing precarity, I feel that it is imperative to rethink minimum wage laws, labour laws and other laws that would aid in their recovery. However, in the current labour environment, these laws would actually not help the majority of this same workforce. Applying only to formal employment, they would likely not be implemented in practice to India’s largely-informal labour class.
No matter what laws we pass on paper, they would only be to the benefit of a small minority of the population. 90% of our workforce remains informal and unaccounted for. Better said, 90% of our people are in a labour environment that structurally incentivises employers to exploit them.
No matter what laws we pass on paper, they would only be to the benefit of a small minority of the population. 90% of our workforce remains informal and unaccounted for. In other words, 90% of citizens are not protected by the laws of formal employment. Better said, 90% of our people are in a labour environment that structurally incentivises employers to exploit them.
Until more of our small businesses and employment contracts are formalised, this vast majority of the workforce will not have access to the rights and protections that should be afforded to all citizens.
There are numerous such laws that are intended to protect, but are completely ineffectual. A classic example is the recently passed Maternity Benefit (Amendment) Act, 2017. The Act was hailed as one of the most progressive in the world as it mandates six months of maternity leave for all women and an on-site creche for childcare for companies with more than 50 employees. On the face of it, this sounds like a great policy, the type that would make it easier for women to join the workforce and thrive. However, because of the specificity in the law and the tiny percentage of women in formal employment, only 1% of women would actually enjoy its benefits.
This debate about informal workers and their rights is by no means limited to India. It is taking place around the world with the advent of the so-called “gig economy” that is growing with companies like Uber. In California, USA, Proposition 22 was passed in November 2020, a law that allows gig economy companies to continue treating their workers as independent contractors with limited rights, rather than employees with rights such as a minimum wage, medical insurance, annual leave, a pension etc. Uber and other gig economy companies reportedly spent USD 200 million to ensure the passing of this law, the most that has ever been spent on a ballot campaign! Setting a precedent for other American states, Prop 22 is a big win for the gig economy, and a loss for workers.
Similarly, in the UK and Australia, there are on-going debates on whether zero-hour contracts should be banned. For decades, these countries have had a majority formal workforce with strong worker protections. The spread of zero-hour contracts threatens to upend this, since it informalises the workforce. Activists and workers in these countries are up in arms about the lack of security and rights when participating in the gig economy. It's time we reacted with the same concern in India, too.
Lack of worker rights has always been an issue in India. Barbara Harriss-White explains,
For several decades, corporate India has shifted the costs and risks of labour onto private subcontractors whose relations with workers range from incomplete verbal contracts, or scraps of paper with discretionary perks for loyalty, to bondage—relying on the lack of alternatives for the casual labour ‘employed’.
Since the majority of the workers operate as if they were independent contractors, there is no job security, no guaranteed income, no pension, making them highly disposable and vulnerable to change in the economy. And this large section of our workforce is left defenseless because as informal workers, they cannot unionize and fight for their rights. They cannot demand compensation. Over time, they are left with increasing uncertainty, unable to weather events such as the pandemic. This is a shame, and we need to take immediate action to protect our fellow citizens.
Formalisation is high on the current Government’s agenda. Demonetisation, the opening of Jan Dhan accounts for 80% of the population, implementation of the universal tax system (GST) and roll-out of Aadhar cards for 90% of the population were massive initiatives meant to further this cause. Despite these initiatives, however, 90% of the workforce remains informal. GST was intended to create a domino effect of formalisation, but a key problem is that the burden of formalisation is too high with plenty of loopholes to circumvent the law.
Photo: Shefali Saldanha
To create this domino effect, the government must reduce the administrative burden of registering and getting licenses, and ensure implementation by conducting regular random audits and imposing high penalties for non-compliance. Under the current system, there is no real penalty (better said, complete impunity) for privileged Indians to hire household help and other staff without contracts. Small businesses are incentivised to keep the number of employees below a certain threshold to avoid costs associated with giving citizens their rights.
This has to stop.
The informal economy represents nearly 50% of our GDP, and, as mentioned earlier, informal workers make up for 90% of our workforce. These numbers are too vast to be ignored. We need to enforce the law that requires employers to formally contract their employees, sanction those that fail to comply, and guarantee the basic human rights deserving to all citizens—especially the most-needy and vulnerable.
We cannot truly be on the path to becoming a developed country until all our citizens actually have access to the comprehensive labour laws, not just 10% or less of them. India’s informal workforce—minorities, women, and the very poor—have been co-authors of our growth story, and ironically have been denied access to reading the story for themselves, denied the laws designed to protect them, and not ensured a decent standard of living. Laws unenforced are laws without meaning.
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Shefali Saldanha is Singapore-based working for an Impact Investing firm managing the India portfolio. Previously she worked for a social enterprise based in Mumbai. She has an MBA from Oxford, a BA from the University of Virginia and over a decade of experience working in the social sector space in India and regionally. You can find her at linkedin.com/in/shefalisaldanha.
